Thomas Lee, Co-President and CIOParametric Portfolio Associates offers portfolio solutions designed around each client’s financial circumstances. Rather than relying on a product-centric investment model, the firm operates through a solution-oriented service approach, structuring portfolios around individual client needs and long-term objectives.
“We approach investing from the client’s perspective, focusing on their challenges, designing solutions that address their specific circumstances, and offer a higher likelihood of success at reaching their individual goals,” says Thomas Lee, Co-president and CIO. “We seek to achieve this outcome by building a diversified, risk- managed portfolio.”
Even before direct indexing became an industry category, Parametric focused on building customized solutions. Early requests for index-like market exposure combined with improved after-tax outcomes helped shape its operating philosophy. Direct indexing emerged from that client-first approach, paving a new way to manage market exposure.
An asset management business unit within Morgan Stanley Investment Management, Parametric manages approximately 250,000 accounts and oversees over 680 billion dollars in AUM. The scale demonstrates its ability to deliver customized portfolio solutions across a broad client base while maintaining access to roughly 300 benchmarks spanning equities and fixed income.
Parametric allows portfolio customization at a granular level, incorporating multi-asset investing, blended benchmark strategies and account-specific portfolio preferences. Ongoing portfolio adjustments allow investment strategies to evolve alongside changes in clients’ financial circumstances. Reduced investment minimums further expand access to direct indexing solutions across a range of investors and financial advisors.
Parametric works with financial advisors, who act as the primary link between the firm and the individual investors. The distribution and support team engages with the advisors to familiarize them with the platform, portfolio capabilities and available investment solutions with the goal of identifying solutions that address the individual client concerns.
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We approach investing from the client’s perspective, focusing on their challenges, designing solutions that address their specific circumstances, and offer a higher likelihood of success at reaching their individual goals.
Once advisors outline their clients’ goals, they work collaboratively with Parametric to identify the solution best suited to meet client objectives. The next step is onboarding and portfolio implementation process through Parametric's digital platform and advanced technology.
After the accounts are funded and verified, Parametric starts managing the portfolio and providing ongoing reporting through platform-based communication tools. Advisors continue to lead the client relationship and often update portfolio instructions over time, managing withdrawals to support client goals and life events, and working with clients to increase funding and allocations as their clients’ circumstances change. They may modify the benchmark or the overall strategy as client needs evolve.
Shifting Direct Indexing from a Product to a Solution
Parametric's solution-oriented approach becomes particularly valuable when clients face financial situations that cannot be easily addressed through standardized, off-the-shelf investment products.
For instance, individuals who have accumulated a large chunk of low-basis stock and are nearing retirement may face significant tax consequences if those holdings are sold outright, making diversification and risk management more challenging. Parametric may help these clients transition assets into separately managed direct indexing accounts designed to support tax-aware portfolio restructuring in a way that examines end goals, manages risk and diversifies portfolios. Through tax-loss harvesting, the portfolios may generate losses that can offset gains realized from selling concentrated stock positions. Over time, those concentrated holdings are gradually transitioned into diversified investments that align with clients’ asset allocation goals.
Parametric’s history demonstrates the importance of customization and its focus on continuously expanding portfolio customization capabilities. The firm also prioritizes technology integration, with sophisticated digital systems designed to simplify portfolio management and trading, client reporting and advisor interactions.
For Parametric, direct indexing is a vehicle that allows its investment teams to deliver highly customized solutions. It focuses on helping investors address complex financial challenges through sophisticated portfolios, an intense focus on tax management, and advanced technology, all designed around client needs and goals.
